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Friday, July 8, 2011
Firms branching out to mitigate disaster impact
Fears of power shortages stemming from the Fukushima nuclear disaster are prompting companies to move to the western part of the country or even overseas to reduce the risk of unexpected business disruptions.
Some companies that own offices only in Tokyo are taking steps to spread out to reduce the risk of being hit by possible blackouts.
And companies that need to use large amounts of electricity for long periods of time without pause are planning to shift some of their production centers overseas.
"We're going to see a shift of the industrial structure in the country," said Koichi Haji, chief economist at NLI Research Institute.
"Companies that use a large amount of electricity will eye more overseas production if they have power supply problems. Those that don't have to use much power will find ways to save electricity," he said.
Already burdened with the dollar's prolonged weakness against the yen and the highest corporate taxes in the industrialized world, many manufacturers are worried that instability in the capital's power supply will undermine their global competitiveness.
After the twin disasters of March 11 crippled the Fukushima No. 1 nuclear plant, Tokyo's main power source, the government asked large-lot users in the east and northeast to reduce electricity use by 15 percent starting July 1.
Kansai Electric Power Co., the biggest utility in western Japan, did the same, asking companies and households to voluntarily cut power use by around 15 percent until Sept. 22.
Any hike in electricity charges would present another threat to companies operating in eastern Japan.
Tokyo Electric Power Co. may have to pay enormous damages to compensate those affected by the Fukushima radiation fallout and raise prices in the near future to help it do so.
Power is a crucial commodity, especially for companies that rely completely on the Internet.
Kenko.com, an Internet-based company that sells health products, including food and cosmetics, began considering the importance of diversifying operations on March 11 because its only offices were in Tokyo.
"If we can't log in to our computers, we can't have access to do anything at all," said spokeswoman Haruka Takizawa.
That means the company cannot receive orders and cannot direct storehouses to ship products, including much-needed necessities such as bottled water and toilet paper, to customers.
Since May, the e-commerce company has been moving some of its operations to the city of Fukuoka. The company plans to move roughly half of its operations and staff to Fukuoka by the end of next March, Takizawa said.
Separately, the company moved one of its storehouses in Utsunomiya, Tochigi Prefecture, to Ichikawa, Chiba Prefecture, which is closer to Tokyo and a more convenient location, to shorten the time needed for delivery, thereby cutting costs.
Meanwhile, glassmaker Hoya Corp. is building a production plant in Shangdong, China, to reduce its exposure to production suspensions at its plant in Akishima, Tokyo, which makes much of the optical glass in high demand for digital cameras. Hoya plans to start its Shangdong operations in December.
"The plan to build a new plant in China is to diversify our risks," said Hoya spokeswoman Akiko Maeyama.
The Akishima plant had to switch off the electric furnaces that make the glass for a few hours a day during the rolling blackouts in March.
This forced it to dig into its inventories and briefly curtailed output.
The experience pressured the glass maker to set up a plant overseas because a power outage would damage any melted raw material in the furnaces needed to make the glass, Maeyama said.
Motor maker Nidec Corp. is another company that needs to use electricity without interruption.
The Kyoto-based company is looking to relocate some of its motor-testing facilities in Shiga Prefecture and development centers in Kyoto and Nagano overseas.
The facilities need a stable source of power to test the durability of its electric motors, which are used in automobiles and other machines. This requires running them continuously for a couple of months.
Experts say this risk-reduction trend is expected to continue.
According to a survey by the Ministry of Economy, Trade and Industry in May, 69 percent of the 163 participating companies said that the March 11 catastrophe would accelerate the complete or partial relocation of domestic parts makers to other countries.